Transcript Afreximbank1 Dr.Chalhoub

Compliance in African banking
Institutions
A presentation on research findings presented at the
Afreximbank forum on customer due diligence.
October 28-29 Dakar/Senegal
Dr.Carlo Jean Chalhoub PhD in Economics and Political Science
Acknowledgments
• Pr. Jean Louis Ekra
• Mrs.Maureen Mba
Outline
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The problem statement
Research question
Research objectives
Research method and design
Population and sample
Data collection
Findings
recommendations
questions
Problem Statement
• Records fines and penalties in the financial
sector for non compliance are forcing financial
institutions to change the way they operate.
• Complying with the new wave of rules and
regulations in the financial sector is a function
faced by several challenges specially in a
continent like Africa, that is relatively new to
any type of financial regulations.
Research question
• What are the organizational barriers the
compliance function (CF) in African banking
institutions (ABIs) face in pursuing best
practices in compliance risk management
(CRM), and what measures can be adopted to
overcome these barriers?
Research objectives
• The organizational barriers that may impact identification
of current and emergent compliance risks in ABI.
• The organizational barriers that may impact the
measurement and assessment of compliance risks in ABI.
• The tools used by CF to manage and monitor compliance
risk in ABI.
• How and to what extent the board of directors and senior
management of ABI have been supportive of initiatives by
CF in CRM.
• How and to what extent costs of compliance, as well as
costs of non-compliance are managed, and handled in ABI.
• Factors impacting the alignment of CRM by CF with best
practices.
Research method and design
• The empirical research was conducted utilising both quantitative
and qualitative methods. The use of secondary data in addition to
semi-structured interviews were subsequently conducted through a
case study of a subset of ABIs to develop an in-depth understanding
of the underlying issues. A focused coding technique was used to
analyse and sort the findings.
• The case study results provided the basis on which the
organizational barriers that ABIs face in managing compliance risk
was researched through a survey questionnaire.
• The final survey sample comprised of 200 survey respondents from
the ABIs. The data was analysed using various statistical analysis
techniques ranging from simple frequency distribution analysis to
the more advanced analyses such as non-parametric statistical
analysis and Multivariate Analysis Of Variance (MANOVA).
Population and sample
• The research was conducted in two stages: First
stage involving comparative case studies of BI in
Ghana, Kenya and Zimbabwe that looked for
patterns and commonalities in CRM and attitudes
towards CRM held by 200 senior ABI
management staff.
• Second, a case study of 137 ABI staff and 97 SABI
staff. Multiple sources of evidence were used in
this examination and participants were invited to
give feedback at multiple stages of this study.
Data collection
• The case study employed three data collection techniques:
1. Interviews with senior managers of the banks. The interviews
were open and flexible, and were conducted using a semistructured questionnaire developed for this project. Interview
participants were drawn from BI managerial staff because
managers are knowledgeable of both strategic and operational
issues. The interviews were conducted over 16-month period and
the lengths of the interviews varied from 60 to 90 minutes. A
semi-structured interview framework was used and a brief
summary of the assumptions and theoretical orientation of the
research were presented to potential respondents in soliciting
their participation. All interviews were recorded and transcribed
to facilitate the analysis of content.
Data collection
1. Document Analysis. A range of BI documents were
collected including strategic plans, policies, and
procedure manuals, codes of conduct, organograms,
job descriptions, promotional materials, different
economic and general bank reports, web information,
internal publications, and institutional videos.
2. Direct Observation. Site visits allowed direct
observation of the CRM process, the relationships
between operating units, the BI corporate culture,
standard operating practices and the general way of
doing things.
Case study
Questionnaire Response Rate
• Number of
Number of
• Questionnaires Questionnaires
• Distributed
collected
• \
• ABI 158
129
• SABI 168
77
Respondent Job Classifications
•
Compliance professionals
• ABI
50%
• SABI
58.5%
Respondent Work Experience
•
Less than
• 5 years
5-10 years
• ABI 59.7%
30.2%
• SABI 50.7%
25.0%
Number of
Questionnaires
Unusable
Response Rate
0
0
81.65%
45.83%
CCOs
28.1%
23.4%
CROs
21.9%
18.1%
Over 10 years
10.1%
24.3%
Total
100%
100%
Total
100%
100%
Key Findings
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Facilitators and Hindrances of CRM
Barriers to Effective CRM
The Compliance Gap
Cost of Compliance
Key Recommendations
There is consensus from ABI that the compliance
function needs to focus on four areas to improve
performance. These areas are:
• Policies and risks.
• Organisation, culture, and people adaptation to
compliance.
• Procedures and controls (including key
performance indicators, key risk indicators,
management information).
• Systems and technology.
Questions and Comments.